ROCKIES WEBCAST SERIES Multi-State Legislative & Regulatory - PowerPoint PPT Presentation

ROCKIES WEBCAST SERIES Multi-State Legislative & Regulatory Update September 15, 2020 Presented by: John R. Chadd, Brent D. Chicken & Diana S. Prulhiere

Overview • Colorado • Wyoming • Montana • North Dakota • Utah

Colorado • Two proposed bills in 2020 • Overview of Senate Bill 19-181 • Two approved rulemakings – Flowlines – Wellbore Integrity • Ongoing joint rulemaking – Mission Change – Cumulative Impacts – Alternative Location Analysis

Legislative Update • HB 20-1126 – COGCC Director’s authority to approve APDs – Local governments with “House Bill 1041 authority” • HB 20-1018 – Colorado Revised Statutes § 40-2-124.5 – PUC rule by 7/31/2021 re: renewable natural gas programs • Both remain indefinitely postponed

Senate Bill 19-181 • C.R.S. § 34-60-102: COGCC Mission Revised – Old = to “foster” oil and gas development “in a manner consistent with protection of” • Avoid “waste” of natural resources – New = to “regulate” oil and gas development “in a manner that protects” • Non-development is not “waste”

Senate Bill 19-181 • C.R.S. § 34-60-104: COGCC Membership Overhaul – Old = 9 volunteer commissioners – New = as of July 1, 2020: 7 full-time, paid commissioners with “more balanced” credentials

Senate Bill 19-181 • C.R.S. §§ 26-20-104,-106: Increased Local Control – Old = state had exclusive jurisdiction to regulate • Localities could not regulate contrary to COGCC action – New = local authority to regulate “surface impacts” • Local pre-permit siting approval • Alternate location analysis • Cumulative impacts

Senate Bill 19-181 • Increased Facility Monitoring/Controls – S.B. 19-181 introduced a series of new legislative mandates to relevant state agencies to establish stricter rules in key areas • Flowlines; Shut-In and Abandoned Wells • Wellbore Integrity Testing • Air Quality and Emissions Standards

Regulatory Update • Completed rulemakings – Flowlines – Wellbore Integrity • Ongoing joint rulemaking – Mission Change – Cumulative Impacts – Alternative Location Analysis

Flowline Rulemaking • Adopted on 11/21/2019; became effective 20 days after publication in the Colorado Register • Amendments: 100 and 1100 Series Rules and Rules 215, 316C, 326, 333, 610, 711, 712, 713 and 906 • Fundamental changes – Collection and publication of GIS data – Inspection + advance notice before re-servicing inactive lines/wells – Third-party verification of lines abandoned in-place – Various technical standards and reporting requirements

Wellbore Integrity Rulemaking • Adopted on 6/10/2020; to become effective on 11/2/2020 • Amendments: 100 Series Rules and Rules 201, 207, 209, 301, 303, 308A, 308B, 311, 314, 316C, 317, 319, 321, 341, 603, 608 • Fundamental changes - Increased Bradenhead - Cementing and casing testing/monitoring requirements - Groundwater isolation - Blowout preventer systems - Offset well evaluation - Well plugging standards

Ongoing Joint Rulemaking • Revised proposed rules published 8/17/2020 • Rulemaking hearings ongoing (concluding 9/23/2020) • Adopted rules to become effective 12/1/2020 • Amendments: 200 – 600 Series Rules • Fundamental changes – Implement COGCC’s mission – Evaluate and address potential cumulative impacts – Adopt alternative location analysis process

Ongoing Joint Rulemaking • Revised proposed rules published 6/19/2020 • Rulemaking hearings scheduled 9/28/2020 – 10/30/2020 • Adopted rules to become effective 11/2/2020? • Amendments: 800, 900 and 1200 Series Rules • Fundamental changes – Same as 200 – 600 Series – Consolidating topics – Localized impacts, waste management, wildlife protection

200 – 600 Series Rules • 200 Series: General Rules – Requires compliance by operator’s contractors/subcontractors – Authorizes required tests/surveys; orders location closure; new Form 9 • 300 Series: Permitting Rules – Implements cumulative impacts and alternative location analysis process – Creates new structure for COGCC review of permits (local governments) – Broader O&G development planning (Comprehensive Area Plans) • 400 Series: Operational Rules – Unifies spacing (transitions away from distinct rules for GWA) – Noise, lighting, metering, public water systems, tracking reused produced water – Transitions towards uniform statewide spacing

200 – 600 Series Rules • 500 Series: Procedural Rules – Defines “Affected Person” and establishes their participation rights – Revises process for variances (Director vs. Commission) – Simplifies hearing procedures (ALJs; new professional Commission) • 600 Series: Safety Rules – Revises certain setback requirements – Identifies inspection and groundwater sampling standards – Creates secondary containment procedures – Implements Operations Safety Management Program

800, 900 & 1200 Series Rules • 800 Series: Localized Impact Rules – Implements COGCC’s mission directive – Consolidates underground injection control rules • 900 Series: Waste Management Rules – Enhance protections of public health, safety, welfare, environment – Waste management, spill & release reporting, emissions, nuisance • 1200 Series: Wildlife Protection Rules – Establishes wildlife mitigation and protection plans – Describes operating requirements for “High Priority Habitats”

Montana • No 2020 legislative session • Regulatory amendment of license and privilege tax rate

Legislative Update • Montana’s Legislature convenes only in odd-numbered years, ending its 2019 Session on April 25, 2019 • The next legislative session convenes in 2021

Regulatory Update • Administrative Rules of Montana § 36.22.1242 amended • Montana Board of Oil and Gas Conservation - Reports by Producers – Tax Report – Tax Rate • Lowers effective oil and natural gas tax rates

North Dakota • No 2020 legislative session • Regulatory amendment of certain NDIC bonding rules • Regulatory amendment of NDIC gas flaring rules • Regulatory amendment of NDIC required royalty owner information

Legislative Update • Similar to Montana, the North Dakota Legislature convenes biennially • The next legislative session convenes in 2021

Regulatory Update • North Dakota Administrative Code § 43-02-03-15 • North Dakota Industrial Commission - Bond and Transfer of Wells • Changes aimed at decreasing and protecting against long-term TA wells and avoided P&A/reclamation costs

Regulatory Update • North Dakota Administrative Code § 43-02-03-28 • North Dakota Industrial Commission - Safety Regulation • Natural gas flaring issues

Regulatory Update • North Dakota Administrative Code § 43-02-03-06 • North Dakota Industrial Commission - Royalty Owner Information Statement • Changes aimed at information provision

Utah • Utah Senate Bill 148 • Regulatory amendment of UBOGM enforcement rules and penalties • Regulatory amendment of statutory pooling rules

Legislative Update • Utah Senate Bill 148: “overhaul” of Utah Code § 40-6-11 • Covers regulatory enforcement portions of Utah’s conservation law • Aimed at strengthening the imposition and collection of administrative penalties assessed by the Utah Board of Oil, Gas and Mining

Regulatory Update • In 2017, the Utah Senate altered the definitions of consenting/non-consenting owners and allowed for pooling and spacing order retroactivity under Utah Code § 40-6-2 • In 2018, the Utah Senate further altered Utah Code § 40-6-2 the definitions of consenting/non-consenting owners and allowed for pooling and spacing order retroactivity • The Utah Board of Oil, Gas and Mining initiated rulemaking to address the statutory changes

Wyoming Changes to Statutory Pooling • • Change to Regulation of Commercial Disposal Wells • Wyoming Energy Authority Established • New WOGCC Rules for Submitting and Challenging APDs

Changes to Statutory Pooling Wyo. Stat. 30-5-109 • • Non-consenting unleased mineral owners now are subject to a lower maximum penalty than that assessed against non- consenting mineral lessees – For the first well drilled in a drilling unit, the maximum penalty is 200% of drilling costs and 125% of well equipment cost, and for any subsequent well drilled in a drilling unit, the maximum penalty is 150% of drilling costs and 125% of well equipment cost

Changes to Statutory Pooling Non-consenting unleased mineral owners now get a royalty • payment during the non-consent penalty phase – Greater of 16% or the acreage-weighted average of the lease royalty being paid on leased tracts in the DSU • After non-consent penalty paid in full, the non-consenting unleased mineral owners have the option either to keep receiving the statutory royalty or participate in the well as working interest owners

Changes to Statutory Pooling A pooling order now expires twelve months after issuance if the • person authorized to drill and operate the force-pooled well fails to commence operations within twelve months of issuance of the pooling order – Previously a pooling order could be valid indefinitely unless an expiration was included in the order Changes became effective on July 1, 2020 and are not retroactive •